DBS Only Need Apply For Loans

Washington -- A House subcommittee last week effectively
dealt the cable industry out of a bill that would provide $1 billion in federal loan
support to providers of local-TV signals in markets that can't get those signals via
satellite today.

In a six-hour marathon session, the House
Telecommunications Subcommittee approved the bill (HR 3615) by voice vote, shortly after
adopting three amendments that represented setbacks to cable and all but assured that loan
guarantees would flow to the direct-broadcast satellite industry.

One amendment barred cable operators from obtaining loans
to build out systems within portions of their franchise areas they are already obligated
to serve.

The ban would also extend to cable upgrades unless the
money is used to "extend service to areas outside of the previously existing
franchise area."

"The cable guy is already there," said Rep.
Edward Markey (D-Mass.), sponsor of the amendment. "It made zero sense in my view to
make incumbents eligible for loans."

Small cable operators, Markey said, were immediately
deregulated under the Telecommunications Act of 1996, allowing them to raise rates to fund
upgrades. He said DBS provision of local-TV signals in rural markets would force cable
operators to respond to new competition.

"We are going to create a competitive spur to those
rural cable operators," Markey said.

An alternative version of the bill, a rewrite sponsored by
Rep. Steve Largent (R-Okla.), would have restricted loan support to the 2 million to 3
million households that can't get local free TV or local signals from cable or
satellite.

But the Republican-controlled panel abandoned Largent and
agreed to an amendment by Rep. Rick Boucher (D-Va.) to strike the language, leaving the
bill with no definition of an "unserved area."

That move will likely mean that loans will flow to
satellite providers of local TV signals in markets not being served by DirecTV Inc. or
EchoStar Communications Corp. -- territory that could encompass as many 30 million U.S.
households.

Lastly, the panel agreed to relax rules requiring the
mandatory carriage of all local TV signals in an amendment sponsored by Rep. Chris Cox
(R-Calif.)

Under the Cox amendment, a loan-guarantee recipient could
refuse to carry TV stations that offer fewer than 21 hours a week of local news, sports,
and weather programming -- a change that could hurt home-shopping channels and stations
that rely heavily on syndicated programming.

The panel rejected a broader Cox must-carry amendment that
excluded the 21-hour requirement.

The adopted Cox amendment would mean cable would bear the
full burden of must-carry, while a satellite carrier fortified with government loan
guarantees would not.

"I just don't want any part of that,"
Largent said. "It is painfully clear now and I just think it stinks."

Although he sponsored the must-carry amendment, Cox said he
was upset that the bill favored DBS so heavily.

"What I don't want to do is subsidize one pay-TV
provider against another," Cox said. "But that's exactly what this program
is going to do."

Cox failed to cut the $1 billion program to $100 million,
$200 million or $300 million.

The original bill would have backed 100 percent of a loan.
Largent tried to scale that back to 50 percent, but the panel agree to hold support at 80
percent.

The original bill provided $1.25 billion, but the panel
trimmed that to $1 billion.

The $1 billion price tag, combined with the 80 percent cap,
will likely prompt the Congressional Budget Office to reduce its cost estimate for the
bill. The CBO had said the original version of the bill would result in $365 million in
defaults and administrative costs.